Nomura cuts Philippine growth forecast

Japanese investment bank Nomura slashed anew its 2021 economic growth forecast for the Philippines due to the reimposition of strict lockdown measures amid the resurgence of COVID-19 infections and the slow rollout of vaccines.

Euben Paracuelles, chief economist for Southeast Asia at Nomura, said the GDP growth forecast for the Philippines has been lowered further to 5.5 percent from the earlier 6.8 percent outlook this year due to the latest COVID-19 outbreak and the lockdown measures.

“The main rationale for our more cautious view is the significant economic impact of the lockdowns (even if less stringent than last year), the fragile starting point with unemployment rates rising again, limited prospects for a sizable fiscal support package and monetary policy that is hamstrung by inflation risks,” Paracuelles said.

Nomura’s latest projection is way below the 6.5 to 7.5 percent growth target penned by the Development Budget Coordination Committee (DBCC) in December last year. The target is up for review next month to take into consideration the latest developments.

In December, Nomura lowered the country’s GDP growth forecast to 6.8 percent from 7.2 percent.

The Philippines slipped into recession with a record 9.6 percent GDP contraction last year.

“Subsequent to this, economic pressure may force the government to relax the measures further. However, we think the approach to re-opening this time has to be more cautious and gradual than before, otherwise an aggressive relaxation may again prove premature,” Paracuelles said.

In addition, the Nomura economist said vaccine procurement and rollout in the Philippines have been slow relative to regional peers.

The government reported that around two million doses have been administered, representing only 0.9 percent of the population and one of the lowest in the region, alongside Thailand. Of the 1.7 million frontliners targeted as the first group to be vaccinated, only around one million have reportedly been inoculated after two months since the start of vaccinations.

“We think this pace is slow considering these are mainly healthcare workers (and are thus arguably quicker to vaccinate). In terms of delivery, the government’s less proactive approach to procurement implies significant delays are likely, in our view. The government acknowledged slower-than-scheduled arrivals of vaccines so far,” Paracuelles said.

Nomura estimates that only around 20 to 25 percent of the population in the Philippines would be vaccinated by year-end versus the government’s target of 50 percent, leaving the country susceptible to recurring waves of COVID-19 outbreaks throughout the year.